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FOOD AND NUTRITION SERVICES CERTIFICATION INCOME AND RESOURCES FNS 315 SPECIAL BUDGETING

4 Section 315 Change #01-2022 January 11, 2022 Under some pay plans an employee can choose to have the employer withold money to pay certain expenses such as child care and medical expenses when they are incurred. If any amount is left at the end of the year, the employee loses the money. The amount withheld is counted as earned income as the money is legally obligated and otherwise payable to the employee. 315.06 CAPITAL GAIN INCOME A. The actual capital gain from the sale of capital goods or equipment is included as income. Determine the actual capital gain as follows. 1. Determine if the FNS unit has capital assets. The following is a listing of capital assets. a. Real property; b. Equipment; c. Machinery; and d. Other items expected to last at least 12 months. 2. Ask the FNS unit if any member has sold or transferred a capital asset. 3. Determine if there was a capital gain realized from the sale or transfer of capital assets. 4. Compute the capital gain as follows. a. Subtract depreciation from the original purchase price of the capital asset to establish the “adjusted basis.” b. Subtract the “adjusted basis” from the sales price to establish the capital gain. EXAMPLE: A farmer purchased a tractor for $3000 in 1984. Over a period of ten years, he claimed $2500 in depreciation on the tractor. In 1994, he sold the tractor for $1100. Purchase Price

$3000 Sales Price $1100 Depreciation Claimed - $2500 Minus Adjusted Basis -$500 Adjusted Basis

$500 Capital Gain $600 B. Budget a capital gain in the same manner as self-employment income. Prorate the gain over 12 months. Count the $600 capital gain as self- employment income prorated over 12 months.